The Myth of Overpopulation

1 Comment

Overpopulation, either locally or globally, is often blamed on a number of apparent problems from the shortage of particular (usually “essential”) resources all the way up to the outright poverty of entire continents. Although few governments, most notably the Chinese, have enacted any strict policies in order to control their populations (except with regards to immigration), factoids such as the allegation that, if every single human wanted to enjoy a Western lifestyle we would need something like a dozen earths, attempt to create an unwarranted degree of hysteria.

The myth of overpopulation rests on the belief that humanity is akin to some kind of cancer which, as it grows exponentially, devours a fixed or arithmetically growing pool of resources that must be shared between everyone who has been unfortunate enough to have been born. This would have been the case in a hand-to-mouth society that preceded capitalism and the division of labour. There was effectively no production and the birth of each individual person constituted merely another mouth to feed. In other words, an increase in population led to an increase in demand for consumption without any corresponding increase in production, thus putting pressure on the existing stock of resources that had to be shared by everyone. Nevertheless, when it comes to shortages of goods in local markets today we can surmise that even if there was a fixed or otherwise relatively limited pool of resources that everyone had to share we couldn’t pin the blame for shortages on such a fact. In a free society, a particular good might be very expensive but it should never be the case that we cannot find anything. As the population increases the price of resources would rise and thus choke off demand for the least valuable uses. Shortages, rather, are always the result of government price controls that try to create the illusion of abundance without the reality, decimating the current supply and obliterating any incentive to produce more. That aside, however, the blatant reality for a capitalist society marked by the division of labour is that there is not a fixed or arithmetically growing pool of wealth and resources, and that the whole purpose of such a society is to grow, exponentially, the amount of wealth that is available. Indeed, as we shall see, humanity has succeeded in this endeavour to only a fraction of its capacity.

When the first human being trod the virgin soil of the earth, he found himself in a situation of almost unrelenting poverty. Mother Nature, as anyone trapped for an extended period of time in the wilderness has discovered, is far from a kind host, providing very little (except air to breathe and fruit on wild trees) by way of resources that can be consumed immediately for very little effort. Yet all of the matter contained in every resource that we enjoy today – buildings, cars, refrigerators, televisions, computers, clothing, medicines, and so – was, give or take a little, right there at the beginning of the world’s existence. Strictly speaking, no human being has ever created anything – rather he has merely transformed matter from one thing into another. So why, if all this matter was there from the very start, weren’t these wonderful things available to our first human? The reason is, of course, that a human must apply his labour in order to change the matter available in the world into useful resources that fulfil his ends. Yet the work of one man with his unaided body alone was not sufficient to create all of the wonderful things that we enjoy today. Indeed, it might take a single human being an entire day to hunt or catch enough fish for just one meal before the process must be repeated the following day. How can this be limitation be overcome?

The first answer is quite simply the very bugbear that is complained about – an increased population. A greater number of humans can together lift and carry a far greater amount than one man alone. Several or many men building a house would accomplish the task in a far shorter time than one man alone. More importantly, however, the widening of the division of labour as the population grows ensures that production stays ahead of population growth. Additional humans constitute an additional demand for consumption – ten humans may require ten houses whereas one human would require only one. But the fact that these men are also producers means that each can now fill his day by specialising in a particular task. One man, devoid of the ability to specialise, may take a year to build one house and he would have to undertake every single activity related to the building work on his own. With ten men, however, two may specialise in lumber felling, another two in transport, some in building, and the task of one the men may be solely to produce food and other supplies for the men doing direct work on the houses. The result of this is a greater degree and concentration of knowledge and an increased perfection of technique and expertise in each task. The resulting time saving means that, whereas one man would take one year to build one house, ten men would less than one year to build ten houses. Thus the rate of house building overtakes the rate of the increase in population. We therefore see that the quantity of labour has a marked effect on the accumulation of wealth and the transformation of matter into useful economic resources, provided that a society is distinguished by capitalism and the division of labour. To further emphasise this point, it is the twin effect of the consumption demand of the additional people coupled with the fact that these people are also producers that makes an ever increasing widening of the division of labour possible. If ten houses have to be produced then it might not be possible for one man to concentrate on any single task in order to fill his day; he might have to work in installing the wiring, the plumbing and the wallpaper. If one hundred houses have to be built then he might be able to concentrate on plumbing alone. If one thousand houses are built then he might be able to specialise on plumbing just bathrooms whereas someone else works on plumbing kitchens, for instance. The ever increasing volume of demand from an increasing population therefore begats an ever increasing division of labour when that population is put to work, and with it come all the benefits of specialisation and expertise.

Second, although it is flexible, the human body is a relatively weak and feeble creature, capable of moving and lifting only a tiny amount of matter at any one time. Regardless, therefore, of the quantity of labour available we can see that fifty men carrying sacks on their back would fail to transport as many goods in as short a space of time as, say, a railway locomotive hauling some wagons. The power of labour is therefore a further limiting factor on the number of resources that can be enjoyed. This power can only be increased by accumulating ever greater amounts of capital. All such goods – machines, tools, vehicles, and so on – are, fundamentally, merely extensions of the human body that enable its labour to accomplish more than it otherwise would. A man with an axe can fell a greater a number of trees than a man whose body is unaided by this implement. For centuries, humans could not labour to extract oil from the ground and refine it into petroleum. Yet with the capital available to construct drilling apparatus, oil rigs and refineries this is no longer the case. Indeed, most direct labour today is not concerned with the production of consumption goods at all. Rather, it is devoted to the production, augmentation and improvement of capital goods. In short, it is directed towards increasing the power of labour.

What we begin to see, therefore, is that it is not necessarily the scarcity of resources burdened by an ever increasing population that is the real obstacle to the growth of wealth and economic progress; rather, it is the scarcity of labour and the power of that labour as represented by the stock of capital goods which serve to enhance it. Goods are, to be sure, the original source of scarcity. We apply our labour only because the available quantity of a given resource exists in insufficient supply relative to the ends to which it could be devoted. Yet the power of our labour is a significant compounding factor on the degree of scarcity that we must endure. My body may only have enough capability in order to fetch a few buckets of water from a nearby stream – yet more than three quarters of the globe is covered in water. It is because the power of my labour is relatively weak that most of this water is either too far away or of insufficient quality to serve me any practical end. Only be improving the power of my labour – by being able to move greater distances, lift heavier volumes and develop processes of purification – could I hope to enjoy more water.

Such a circumstance is not limited to such a clearly abundant resource such as water. The entire world, right from the depths of the core of the Earth all the way up to the stratosphere is densely packed with matter. Our labour has only ever been able to harness a mere fraction of these resources, mostly skimmed from the Earth’s crust. As time goes on however, as population increases and with it capital accumulation and the widening of the division of labour, we harness the ability to tap into more and more of these resources. Hence, mines and oil fields that were once too costly to drill are now drilled (and, indeed, are more productive than the most productive fields of yesteryear); such mines could eventually reach depths of miles rather feet; and valuable elements can now be extracted from more complex ores. There is no reason to believe that this process cannot continue. Even today, the sea contains traces of elements such as gold which, in their totality, amount to a far greater quantity than all of that ever mined from beneath the land – 20 million tons compared to 175,000 tons respectively. Yet our labour is insufficient to take advantage of this fact. Indeed the sea remains one of the greatest untapped resources available to us. Unlike private land settlement which led to a prosperous agriculture and exploitation of the land, government has pretty much closed off areas of the sea to the possibility of settlement, preventing the development of a full-fledged aquaculture and robbing us of the ability to exploit this wonderful gift of nature.

It is for this reason – the increasing power of labour – that all predictions of resource depletion as a result of overpopulation (not to mention the ridiculousness of disingenuous “facts” such as the allegation that twelve earths are required to give everyone a Western lifestyle) – have failed. In the well known Ehrlich-Simon wager, for instance, economist Julian Simon made a bet in 1980 with biologist Paul Ehrlich that the price of five metals of Ehrlich’s choosing would have declined in price ten years later – indicating increasing availability of resources rather than increasing scarcity. Simon won the bet outright, in spite of a population increase of 800 million during that decade. Other peddlers of the overpopulation thesis, such as Albert Allen Bartlett, have labelled the views presented here as “cornucopian” or “the new flat earth” – mythical, whimsical and not based on any serious scientific understanding. What these people share in common is that they simply do not account for the future economic viability of production from what are currently viewed as uneconomic resources. For the clear result is that as population has increased we have been able to apply more labour with a greater power of that labour to a greater number of the world’s resources in ways that we were not able to do before. The ultimate goal, needless to say, would be something akin to molecular engineering – the ability to transform worthless matter such as dirt, trash or even air – into valuable resources. The futuristic “replicators” on TV shows such as Star Trek can apparently conjure goods such as a fully cooked meal out of thin air; yet the science behind would not be too difficult to imagine. We have already harnessed the ability to transform matter into energy through processes such as combustion. We can envisage that one day we could do the reverse and transform energy into matter. An inedible sack of coal could end up as a fabulous meal on your dining table.

Overpopulation does, however, give the appearance of being a problem as a result of government interference. Above we noted above, additional consumption demand represented by an increasing population serves in increase wealth provided that the additional population are also producers and therefore will act so as to widen the division of labour and the accumulation of capital. Yet the actions of government serve to swell consumption while choking off production. Pressure on resources and industries therefore arises from government control of these things. Britain’s decrepit healthcare, energy and transport systems are bursting at the seams as a result of demand and increasing costs, a direct result of inefficiency combined with prices that are too low which serve to swell consumption demand in these industries. Government pays its citizens to produce babies and thus increase the population, while an increasing immigrant population today is induced not by the freedom to pursue one’s own goals and to better one’s own life for oneself through hard work and productivity, but, rather, by generous welfare states. All of this causes a rising population that contributes to consumption but very little by way of production. In other words, if you set up the economic system to make consumption as care free as possible and production as costly as it could be then the excess of consumption and a deficit of production will give the illusion of overpopulation. Government therefore begins to look on its citizens as pests and parasites, wanton consumers of precious resources that are desperately running out. Yet the problem is not with resources; rather the problem is with the ability of the government to swell the ranks of consumers and its inability to increase the power of labour, together with its incessant stifling of anyone else who tries to do so. Every additional person who is born in the world is another mouth to feed, another person who will demand the consumption of resources. Yet that person could also be a producer who will widen the division of labour and help to grow the capital stock. Government succeeds only in breeding the consumer in a man while totally destroying in him the producer.

Turning to a related aspect, the fact that whole continents, such as Africa, are mired in poverty has nothing to do with the allegation that the richer countries refuse to “share” their wealth. If the richer countries did not have their wealth, it would not mean that poorer countries would have more – the wealth simply would not have been produced, period. Indeed, whatever wealth that does exist in poor places is often the result of Western enterprise or outright gift. These places do not lack resources; rather, they lack the institutions of private property and voluntary exchange that enable capitalism and the division of labour to flourish, and with them a greater command of labour over resources. Indeed, many of these countries are proceeding down the wrong path by setting up welfare states, trade unions and Keynesian economic (mis)management overseen by democratic institutions which are, of course, the very things that are destroying the standard of living in the West. The West achieved its greatest accomplishments in a pre-democratic, pre-welfare state and pre-union age before Marxism and socialism succeeded in leading the onslaught against capitalism and private property.

What we can see, therefore, is that overpopulation is not a fundamental economic problem. It is only an apparent problem in a society that is hampered by government intervention and the stifling of private property rights, the division of labour and capital accumulation. However, even if population started to put pressure on resources when, in a capitalist society, we reached the (unlikely) point where we were regularly turning over all of the matter in existence to meet our ends – we would still conclude that this would not be a problem worthy of any serious attention. Or at the very least, it would certainly not be a problem that merited any centralised, government control. For as population increases relative to the supply of resources, the latter become more expensive. The cost of raising a child therefore itself becomes prohibitively more expense and people would need to choose between devoting ever more valuable resources to themselves or to their children. Indeed one of the first of such resources to exert this pressure may well be land, assuming we have not, by then, invented the ability to produce more of it artificially. We could, of course, build upwards and end up living in skyscrapers but people may prefer to breed less and have more land available to themselves rather than to their children. Such choices may serve to relieve, naturally, any exponential growth in population figures. Even if, though, people desired to keep on having more children it would only indicate that they prefer the company of children to enjoying more resources for themselves. There is no objective standard by which to complain about the result of such a choice. Nevertheless, even when it comes to the question of land, humanity is currently so far from this point that we hardly need to bother mentioning it, except to try and concede to the overpopulation thesis its best possible case.

The illusion of overpopulation is exacerbated today by a fundamentally antagonistic attitude from what Murray Rothbard called the “professional foes of humanity”, the environmentalist movement1. Apart from this movement’s interference in one the most crucial markets for capital accumulation – the production of energy – the fundamentals of their philosophy view the earth as inherently beautiful and sacred, and any of humanity’s attempts to exploit it as sacrilege. Such a view is radically anti-human and can only hold that the problem with the Earth is that there are too many of these stupid, dirty, polluting, and wantonly consuming human beings. Given the influence that this movement holds it is no small wonder that such thinking permeates into more mainstream views. That aside, however, we can conclude from what we have learnt here that humans need not fear increases in population. What they should fear, however, is their government turning additional people into spoon fed eaters with shackled hands – consumers who cannot produce. It is this fact that puts a very real pressure of resources. It is therefore not overpopulation that is the real problem but, rather, “over-government”.

View the video version of this post.

1Murray N Rothbard, Government and Hurricane Hugo: A Deadly Combination, Llewellyn H Rockwell Jr, (ed.), The Economics of Liberty, pp 136-40.

Advertisements

Libertarian Law and Legal Systems Part Five – Property Rights, Trusts, Unjust Enrichment and Other Considerations

Leave a comment

In this final part of our survey of libertarian law and legal systems, we will cover some other areas of legal liability and some miscellaneous considerations before being in the position of sketching a final map of libertarian law.

The Standard and Burden of Proof

In contemporary legal systems the requisite standard of proof differs depending upon the type of action. The imposition of criminal sanction requires proof to be established beyond a reasonable doubt whereas civil liability requires the same to be established only by the balance of probabilities. The reason for this, presumably, is that criminal sanction is viewed as being a greater incursion of one’s liberty than civil remedies such as furnishing compensation. Not only could one be locked up in prison but one is usually lumbered with a criminal record so that it is impossible to disassociate oneself from the illegal act for at least a period of time. Furthermore, the traditional replacement of the victim by the state in the prosecutorial process of criminal trials is, no doubt, deemed to require stricter due process to protect the individual from persecution by the government.

Much of this is irrelevant from a libertarian point of view. Although we have not discussed in detail the different remedies that flow from criminal liability on the one hand and civil liability on the other, the enforcement of all laws in a libertarian society is an incursion against an individual’s liberty. Taking someone’s money in order to furnish compensation for a tort is as much an invasion of that individual’s person and property as locking him away for a crime. Low standards of proof would result in legal remedies themselves becoming de facto breaches of the non-aggression principle. Therefore, in order to legitimatise the proposed legal remedy it is likely that only the strictest standards of proof will be accepted by a libertarian legal system – even for tortious as opposed to criminal liability. In other words, the fact of physical invasion, the extent of the aggression and the corresponding intent of the defendant must all be established beyond a reasonable doubt, or some equivalent that the libertarian courts devise.

The initial burden of proof, properly, rests on the plaintiff and not upon the defendant, just as it does in our contemporary legal systems. It is up to the plaintiff to establish a prima facie case by proving the presence of aggressive behaviour – rather than for the defendant to establish the more difficult proof of its absence. It is the plaintiff who is alleging the existence of a conflict arising from scarcity; the defendant, for all he knows, may be just going about his daily life unaware of it. It is therefore up to the plaintiff to demonstrate the substance of that conflict. Although the old adage “innocent until proven guilty” is of greater relevance when one is faced with the imposition of legal liability by the state, it applies equally in a libertarian world. The alternative, where the plaintiff could pursue a case without having to bear any burden of proving his case and thus gain “compensation” merely on his say so would allow the pursuit and sustenance of all manner of frivolous lawsuits, transforming the law from a bulwark of justice into a vehicle for wealth redistribution. Upon the establishment of a prima facie case by the plaintiff the burden may shift to the defendant and it is then up to the latter to furnish defences or mitigating circumstances in order to either reduce his liability or absolve him completely.

Vicarious Liability

A rule that libertarian courts will almost certainly impose is that the liability should be of the true aggressor only and that any form of “vicarious liability” is unwarranted. This consideration normally arises when employees of an employer carry out an invasive act during their working day. For example, a workman who knocks a tool off of scaffolding striking a pedestrian below; or a lorry driver who runs over an old lady. Faced with a lone plaintiff who has borne an enormous loss the urge to make “the deep pockets” pay has often proved irresistible to courts. Holding employers vicariously liable for the acts of their employees, or “inflating” the terms of insurance contracts to make the insurer cough up, often ensures a greater chance of recovery for the victim rather than pursuing the employee or individual defendant who, alone, may possess few or no assets worthy of furnishing compensation.

There will be occasions when employers will be liable for their operations when those operations result in a tort; for example when employees are only following a procedure specified by their employer and the employee did not know any better – in other words, in cases where the employee is acting as agent for the employer. Employers are likely to lay down specific procedures and safety guidelines for their employees, the breach of which will demonstrate conclusively that the employee was at fault, although the greater hope of the employer will be to avoid any accident in the first place; a tortious situation may not generate any liability for the employer but it may nevertheless result in embarrassment and brand impairment when one’s company name is involved. Employers are also likely to specify in the contract of employment the situations in which he will be liable and those in which the employee will be liable so that the employee is highly aware of the situations in which he is operating as an agent for his employer and when he is operating as an individual. Generally, however, what will make the difference is where there is an operative intervening act of will by the employee that causes the aggressive act – an intervening act that diverts him from the normal course of employment and is a fresh act not commanded by his employer. If there is such an intervention by the employee then he is liable. A workman who drives carelessly in his employer’s van between jobs and strikes a pedestrian would be liable, alone, for that invasive act. It was he whose will directed the van into the path of the pedestrian. Simply because he was acting during his working day and with his employer’s property does not invoke any liability on the part of the employer. Applying a reductio ad absurdum to the contrary, would we permit an employee to pursue a criminal rampage and then throw the employer in jail simply because the employee was wearing his work clothes? If not then neither should we hold employers responsible for the less culpable acts of their employees. On the other hand, if the van had faulty brakes because the employer had chosen not to service the van, then the employer would be liable for any accident caused by this fact.

Personal Rights, Property Rights and Trusts

Roman Law made a distinction between the types of right or action available to a plaintiff – the rights in personam and rights in rem. This has survived into modern English law as being personal rights on the one hand and proprietary rights on the other. A personal right exists when an individual is owed a right by a specific person – i.e. the obligation by that specific person to pay a sum of money. The legal noose that you hold is round the neck of the individual and is not attached to any particular sum of money that the individual might pay over. A proprietary right, on the other hand, is over a specific piece of property regardless of its current possessor – your right is attached to that property and follows that property wherever it goes.

With libertarian law and its focus on property we must be, in the first instance, suspicious of this distinction. In the first place aren’t all rights in a libertarian world property rights and aren’t all people demanding the enforcement of their property rights? Secondly, don’t all rights and obligations exist between individuals and not between individuals and things?

The confusion stems from the way in which contemporary legal systems, possessing no rationale as to the concept of property, understand the meaning of “title”. The reason why rights and ownership claims over property arise is to avoid conflicts arising from scarcity – conflicts which take their substance as two or more people wishing to take ultimate control and possession of the property. Any one person at any time will have physical control and possession of the property and it is this person who has the de facto title to that property – what we might, for argument’s sake, term the possessive title. It is within his actual, physical power to dispose of that property as he wishes. However, when we say in a libertarian sense, that a person has “title” to property we mean this normatively – that the individual should have – i.e. is entitled to – possession and control of that property but may not necessarily have it at this moment in time. It is by comparing the possessive and normative titles – who does and who should have control and possession respectively – that we can determine who is violating the rights of whom, if at all. A creditor, for example, has a normative title to a sum of money on its due date; the debtor has possessive title. The debtor is required to relinquish possessive title to the creditor. If he does not do so then he is in violating the creditor’s normative title and may be subject to legal sanction.

In a libertarian sense, therefore, a person may have a normative title to property but this does not necessarily mean that he will be entitled to a proprietary remedy as understood by contemporary legal systems. In other words, he will not necessarily have a noose around a specific, earmarked piece of property in the debtor’s possession and will, instead, only have what is termed a “personal right”. After all, strict, proprietary rights may simply be unavailable. A defaulting debtor, for example, may owe money to numerous creditors yet have insufficient funds to pay all of them in full. The creditors cannot enjoy a proprietary title as the funds simply do not exist for them to have title over. All they have is the normative, legal force of the debtor’s obligation to transfer to them possessive title of a sum of money. Indeed, at least when it comes to the enforcement of debts to be paid in money, the whole distinction only really becomes relevant for practical purposes at the point of litigation when one is dealing with an insolvent debtor. Although we are not examining specifically bankruptcy laws in a libertarian world, we must assume that something akin to limited liability partnerships or corporations may exist and there will exist occasions when multiple creditors have to share between them an insufficient pool of assets in the debtor’s possession in order to extinguish as much of the debt as possible. Where, in such an instance, a creditor can only establish the equivalent of a personal right – i.e. no right over a particular set of the debtors’ assets – then he must take his place amongst all the other creditors, sharing out the assets that remain and must be content to write off the unfulfilled portion of the debt. Where, however, a creditor can establish a proprietary right, it enables him to ring fence that particular good in the debtor’s possession and prevent it from being parcelled out amongst the other creditors. One therefore leapfrogs ahead of everyone else to whom the debtor owes obligations. Such a creditor with a proprietary title is said to be a secured creditor. There is therefore a strong incentive for a creditor to attempt to establish a proprietary title over a specific piece of property in the debtor’s possession as it almost guarantees that his debt will be paid in full.

We might say, therefore, that in keeping with the libertarian understanding of property rights and titles, the distinction will be between a personal action on the one hand and a proprietary action on the other; the former being the suing of a specific person for a thing; the latter being the suing for a specific thing of a person. How will libertarian legal systems handle these types of action and in which cases will it recognise a proprietary remedy on the one hand a less exalted personal remedy on the other? What form will a proprietary remedy take?

Before we proceed with this discussion it is appropriate here to discuss the trust mechanism. A trust is a specific type of property arrangement. It is where the possessive title is held by one individual (“the trustee”) whereas the beneficial title is held by another (“the beneficiary”). The latter’s title is not a mere personal right over the trustee; rather, it is a full, proprietary title over the assets that form the subject matter of the trust and these assets are segregated from the trustee’s personal assets so that in the event of the trustee’s insolvency his creditors may not touch the trust property. A trust is not an independent causative event of legal liability such as a tort or contract; rather, it is the property arrangement that results from a causative event. For example, a contract may create an “express trust” in order for a trustee to manage property on behalf beneficiaries – for example, an investment trust or a charitable trust. On the other hand, courts may impose trusts – referred to as “constructive trusts” or the more bizarre “resulting trusts” – in response to wrongs or unjust enrichment. Where, for example, an individual aggresses against a person’s property, a court might hold that the aggressed party retains a beneficial title over that property and the property is therefore ring-fenced from the aggressor’s assets1.

It is possible, indeed likely, that the trust arrangement will remain in a libertarian legal system, both as purposeful arrangements in order to dispose of property in a prescribed way, or as the result of an outcome of litigation. Our interest here is with the latter – when and where are libertarian courts likely to award a proprietary remedy to the plaintiff and when will he gain a mere personal right? In order to discuss this with clarity, we ought to first suggest some terminology for the different types of titles that can exist over a piece of property:

  • Possessive Title – held by the person with de facto control and/or possession of the property;
  • Beneficial Title – a proprietary title that ring fences the property securely from the assets of the holder of the possessive title; this title is both de facto and normative and will be held only by the individual whom the courts deem should possess it;
  • Personal Title – a title that enables a person to use legal force to demand possessive title from the holder of the latter; the title is normative only; no property in the debtor’s possession is ring-fenced2.

Under pure libertarian theory, no aggressive act would be sufficient to transfer any title over property whatsoever to the aggressor and full proprietary title would remain in the hands of the plaintiff. However, as we keep stressing throughout this series, law and legal systems have to deal with the practicality of legal enforcement and recovery, the greatest consideration of which is cost.  What follows is likely to be the most sensible approach of libertarian legal systems to balance libertarianism’s approach to property on the one hand with practical considerations on the other.

Where the good that is the object of aggressive behaviour is non-fungible and exists as an independent, stand-alone, ring-fenced entity then the courts will award the plaintiff with a beneficial title to that property. For example, if A delivers a television set to B in advance of the payment of £100 for the set to which B agreed, possessive title of the television set passes to B. In the event of B’s default the court is likely to recognise A’s beneficial title over the television set. A’s right, therefore, extends over the television set and does not follow, for ever and a day, the particular person who presently has possessive title over the television set but may not do so in the future. The primary good that will usually subject to proprietary remedies will, of course, be land. Land is non-fungible, ring-fenced, easily identifiable and, also, immoveable – making the awarding of a proprietary remedy to the plaintiff the most desired and the most practical solution.

Where, however, the good is fungible and mixed with other, equally fungible units of the good so that it is neither independent nor ring-fenced then the court is likely to award the plaintiff only a personal title to that property – a right that follows the specific debtor and not the actual physical matter that is subject to dispute. The most common form of fungible good is, of course, money. If B pays A £100 in advance for delivery of a television set, that money is transferred into A’s bank account and is mixed with all of his other monetary assets. These will be used to pay other creditors and suppliers in the meantime before B’s delivery may become due. There is absolutely no way that, in the event of A’s default, it could be said that any specific quantity of notes, ounces of gold or whatever that B transferred to A were his, much less so if A has transferred a portion of those funds to pay other suppliers. The contrary would result in the absurd position where every single unit of currency would be tagged and tracked in and out of A’s possession, into his bank account, and out to third parties, then onto other parties and so. Especially as a period of time usually elapses before a legal action is pursued, one might have to go to the ends of the earth to pursue one’s actual money if it had been subject to hundreds of transfers in the meantime. Rather, the court is likely to hold simply that B possesses a personal title to £100 of A’s and it remains A’s obligation to pay that money across. A simple test of fungiblity is to ask whether the plaintiff would be satisfied with payment of any unit of currency or ounce of gold etc., or whether he does in fact demand the very units or ounces that the defendant took from him. If you are owed £10 you don’t necessarily want the very note that was taken from you – you just want any £10 note, or two £5 notes, or ten £1 coins, or whatever.

Gradations between these two extremes – non-fungible, ring-fenced goods on the one hand, and fungible, mixed goods on the other – will have to be dealt with on a case-by-case basis. For example, one television set may be like any other that is manufactured just like it and a person owed a television set may be happy to take any one. These television sets may be pooled in a warehouse and not yet allocated to specific customers; indeed, there might not even have been enough television sets produced to fulfil all of the orders. In such cases only personal titles may be awarded to the plaintiff. On the other hand, money can be easily ring-fenced by its deposit into a segregated account; other fungible goods such as shares may be held on trust by a manager for numerous investors, their proportionate share of the property remaining constant depending upon their contribution to the fund. These are the sorts of considerations that courts will be faced with when determining whether to award personal or proprietary remedies as the result of litigation.

Concurrent Liability

It is sometimes the case in contemporary legal systems that the same facts can give grounds for a plaintiff to bring an action under different areas of the law. For example, a plaintiff may be able to bring an action under contract or under tort. This possibility stems, once more, from the divorce of contemporary legal systems from any rationale as to precisely what it is that generates legal liability. Under libertarian principles it is only a physical invasion of the person or property of another that gives grounds for liability. Nothing else will suffice. Under libertarian law, a “contract” is not, strictly speaking, a causative event of legal liability. Rather, it is an area of the law that gives a body of rules for examining the property relations that exist between the parties. Once these relations are established, the only question that determines whether there is legal liability is if there is a physical invasion of property under those arrangements. The courts therefore face two questions when it comes to the determination of the liability of the defendant:

1. What are the property arrangements between the parties?

2. Having established these property arrangements, did the defendant commit an act of aggression against the property of the plaintiff?

If the case is one of a simple, unilateral wrong then the first question can usually be overlooked. It is assumed that whatever each party brought to the situation belonged to him. If A punches B then it is clear that the body of A belongs to A and the body of B belongs to B, barring some special circumstance. On the contrary, where A is trying to take property from B that B previously stole from A, A will adduce evidence that the property was rightfully his and the question of what the correct property arrangements between the parties are will have to be examined.

One particular area of the law where this question is quite important is product liability – specifically, products that turn out to be dangerous and cause injury, as opposed to products that merely do not work or are not “fit for purpose”. In these cases, there is a contract between the parties for the transfer of the product. In the famous case of Donoghue v Stevenson, for example, the plaintiff purchased a ginger beer bottle from a bar. The bottle of ginger beer, unbeknownst to the plaintiff, contained the remains of a rotting snail. The plaintiff drank the beer and fell ill as a result of its contents and sued the defendant in tort. Other examples include the notorious “hot coffee” cases – where plaintiffs have purchased a cup of coffee and have then sued the vendor for the medical costs when they have spilt it on themselves.

At first blush, these cases seem a little mysterious to libertarians. In Donoghue, hadn’t the plaintiff purchased the bottle of ginger beer and did she not imbibe its contents wilfully? How is it possible, at the point she was injured, for there to be any aggression on the part of the defendant? Indeed, it seems ironic that the seminal case in English tort law is one in which the plaintiff seems to have injured herself with her own property3. The correct analysis of the case, however, is to examine the contractual relations between the parties in order to determine the property relations first. The contract was for the transfer of a bottle of ginger beer. It was not for a bottle of ginger beer containing a snail. Title to the ginger beer bottle containing the snail never passed and thus the injuries resulting to the plaintiff were caused by the invasive action of the defendant placing the snail in the ginger beer bottle. Hence the plaintiff could properly sue the defendant for an aggression. The case would have been different had the contract specified that all defects in the product were the responsibility of the purchaser or if the contract had been for “the object in front of the parties” and not for an object of any particular description. In such an instance, full title to the ginger beer bottle containing the snail would have passed to the plaintiff and she would have had no action as the injury resulted from her own, subsequent actions. While this is theoretically possible, of course, most vendors will be keen to specify the compensatory remedies available in the contract and the discipline of the marketplace is likely to prevent them from passing on liability for their errors wholly onto the shoulders of their customers. In principle, however, it demonstrates the importance of determining the property arrangements between the parties prior to any investigation as to whether there was any aggressive action. Similarly, in the “hot coffee” cases, the action turned on whether the coffee served was too hot and was, therefore, a markedly different product from the one which was contracted for. If it was, then the defendant’s act of “overheating” the coffee was an aggressive act and the plaintiff would have a legal remedy. If, on the other hand, it wasn’t and the coffee was served as either the contract (or the customary and conventional definition of “coffee”) specified then the plaintiff would have no legal recourse.

Unjust Enrichment

It is with this understanding that we can proceed to examine the area of the law known as unjust enrichment. Usually referred to as the law of restitution, unjust enrichment is, like contract, not an independent causative event of legal liability but, rather another example of a type of property arrangement between the parties. It is appears in every situation that is akin to the mistaken payment of a non-existent debt. A owes B £500; he pays, in error, £1000 so that B has been “unjustly enriched” by £500. B is required to transfer the overpayment back to A.

For a long time in our contemporary legal systems discussion of unjust enrichment was buried in that of other areas of law, mostly contract. It is not difficult to see why as most cases of mistaken transfer will occur when there are pre-existing relationships between the parties. Indeed, a simple payment made in error or an overpayment is only the most basic case. Others include mistakes regarding the property that is the subject of a contract – i.e. A thinks he is purchasing a car and pays B for a car when B thinks he is selling a van and believes he is receiving money for a van.

Once again, lacking any rationale as to what should constitute the triggering causal event of legal liability, case law and academic writing has been divided between whether the plaintiff’s case is actionable because of some “unjust factor” on the one hand – that it would, in some way, be “unjust” for the defendant to retain the property – or because the mistaken transfer had an “absence of basis” on the other. Libertarian law should be able to transcend this debate. Our first task is to examine precisely which property arrangements arise under the fact of the mistaken payment; we then have to see if the defendant aggressed against property that belonged to the plaintiff. In all cases of unjust enrichment – whatever the facts from which the claim arises – there is, initially, no aggression. The payment is made freely and voluntarily by the plaintiff – he sends it into the defendant’s possession and voluntarily transfers to him possessive title of the property. The defendant in no way initiates any action that invades the person or property of the plaintiff. It is likely the courts will recognise that the normative title to the property remains with the plaintiff from the point that the “mistaken” transfer was made. It is not the defendant’s property – the fact of “mistake” itself reveals that the plaintiff made no transfer of the normative title to the property upon the defendant4.

Whether any situation akin to a “mistake” occurred will have to be judged from examining the actions and arrangements between the parties. Let us examine the simplest of cases – where the plaintiff alleges that there was a simple error of overpayment by him to the defendant. In order to determine the fact of mistake, the court would have to ask whether there is a valid contract for the transfer of the sum; or whether it was a gift or donation. For example, if you are presented with an invoice from your phone company for £50 and you pay £100 this would, in most cases indicate that the overpaid sum was mistaken, unless the telephone company could adduce evidence that the plaintiff was making an advance payment for future services or (more unlikely) a gift or a donation.

Having established that the property still rightfully belongs to the plaintiff and not to the defendant, we then have to determine if the defendant aggressed against that property. The initial act of transfer by the plaintiff will not be, as we have said, an act of aggression by the defendant. However, anything else that the defendant does with that property – i.e. a fresh act resulting from the intervention of the defendant’s will – is, under our standard of strict liability for aggression, an invasion of the person or property of the plaintiff and the defendant is prima facie liable. If this occurs after the defendant realised the mistake then the case is straightforward – it is a clear and wanton act of aggression against the person or property of another and the case simply proceeds as an ordinary case of tort or crime. The difficulty, however, is what the courts should do if the defendant should make such an intervention of will before he realises that the transfer was mistaken. He could trade it, alter it, destroy it or otherwise dispose of it entirely innocently and only because the plaintiff voluntarily transferred the property to him.

It is likely that the courts, although sustaining the prima facie liability of the defendant based upon strict liability, will permit the defendant to invoke the mistake of the plaintiff in transferring the sum as a defence against all acts of aggression that occur between the point of transfer and between the point that the defendant realises the mistake. The precise latter point will need to be determined by the courts and the burden will fall on the plaintiff to adduce evidence of precisely when the defendant knew that receipt of the transfer was mistaken. This gives a clear incentive for plaintiffs to communicate the fact of mistake to defendants in a timely manner as the communication itself will bring forward the point that the defendant is made aware of it. Alternatively, if the defendant is a business, producing a statement of account would likely suffice as evidence of overpayment or mistaken payment in the simplest cases5.

Wherever the point at which the defendant becomes aware of the mistake, after this point he may not commit any act of aggression against the mistakenly transferred property and is required to return it to the plaintiff. For any acts before this point he will be protected.

How can we justify this defence? The first and simplest answer is the plaintiff’s material contribution to the act of aggression by sending his property into the possession of the defendant. It seems unjust to hold the defendant liable when he, the defendant, has had the property of the plaintiff forced upon him. Indeed, an alternative analysis might even hold that the unjust enrichment is itself an act of aggression on the part of the plaintiff. This can be contrasted with the situation where the defendant commits an act of aggression against the plaintiff’s property and each party is, similarly, unaware of it until a later date (such as if the defendant causes the overpayment by accidentally making a charge to the plaintiff’s credit card, or collects the sum by Direct Debit from the plaintiff’s bank account). Here the lack of awareness will not absolve the defendant as the act of aggression was wholly of his making. Second, consider the situation where the mistake is, in fact, never realised by the parties. What happens then? Legal rights and obligations arise only when individual parties recognise a conflict arising from scarcity. Absent any realisation of a conflict then there is simply no substance for legal rights and responsibilities. During the point between the transfer and the realisation of the mistake, each of the parties believes that everything is sound and nothing untoward has occurred; both parties go about their daily lives as if nothing had happened. In short, at this point, there simply is no conflict. Indeed, both may go forward from that point in total ignorance that the mistake had ever occurred and it will go with them to the grave. Both parties will proceed with their lives unmolested by the law while they remain in this state. The fact that the mistake becomes realised at a later date does not change the ex-ante­ position between the parties. Once again we can compare and contrast acts of physical invasion of which the parties are not immediately aware – particularly noise, light, odours and so on. Whether or not these are aggressive depends upon the plaintiff enforcing his rights. If he does not so within a certain period of time then it demonstrates that there was no genuine conflict and the courts may grant an easement title to the defendant to continue the “invasive” act. Similar considerations may apply here. If the plaintiff does not take steps to enforce his rights and demonstrate his realisation of the mistake then it proves that there is no substance to the conflict and after that time full title to the mistakenly paid property may pass to the defendant. Third and finally, we must also remember the libertarian principle that each individual person is responsible  for all of those acts which he initiates. This includes ensuring that it does not aggress against any other individual but it also means that you are responsible for your own mistakes with your property. Whatever you do, whether you produce it, consume it, destroy it, trade it, you cannot compel others to pay you for losses arising from any mistaken appreciation of carrying out these actions. If you cannot hold anyone responsible for your unilateral mistakes with your property then it follows that you should not, as a plaintiff, hold them responsible when the mistake is bilateral and wholly of your origination. Indeed, “mistake” itself is a very broad category and can involve anything from hitting an incorrect digit on a keyboard all the way to having a complete misunderstanding about the market environment for a particular business venture. Your losses in both instances are “mistakes” yet we would never suggest that a loss making businessman is not responsible for his losses; in turn, he should also be responsible when he makes an error when transferring a payment. Such mistakes are also a natural part of life – not only through absent-mindedness, but misinformation, misunderstanding and also where payments are initiated before a change in circumstances becomes apparent. And as we said in our discussion on liability for wrongs, the responsibility for these events remains with the property owner. In short, if you throw your sheep to the wolves, do not automatically expect that you will be able to get it back. At the very least we can say that this defence is consistent with the approaches towards aggression we have discussed previously.

What is the extent of this defence? Much of this question is likely to depend on whether the courts vest in the plaintiff a proprietary title over the mistakenly transferred property or merely a personal one. If it is a personal one – as in the case of fungible, unsegregated goods such as money – the defendant is likely to be liable to make the repayment even if he transferred the very notes paid over to him in error out of his possession. The strongest likely defence in this instance will be that of “change of position” – where the defendant can adduce evidence that he innocently changed his financial plans as a result of the mistaken payment, assuming that he had more funds than he thought he did. This has occurred in cases where banks have mistakenly paid sums into the wrong bank account. Genuinely assuming that they had more money than they thought, the recipients proceeded to increase their spending. Should such a change of plans be evidenced then the banks should forfeit the loss. On the other hand, if the title is proprietary then the plaintiff’s claim follows the particular piece of transferred property. Anything that the defendant does to the property before the mistake is realised the plaintiff will have to live with – if this includes alteration or degradation then he will receive it back in its altered and degraded state. If it is transferred out of the defendant’s hands to a bona fide third party the plaintiff may have to forfeit the property entirely.

Finally we can compare and contrast the situation of a mistaken payment with that of the transfer of sums of money in advance for the performance of a service or in exchange for another good. Here, a normative title over the money remains in the hands of the transferor at all times. Although the act of aggression only occurs once the defendant fails to perform his half of the bargain, this does not mean he can  invoke any defence if he trades or otherwise disposes of the money before that time. For here, the parties are aware of the property distribution between themselves and will very much be aware of a conflict should the defendant abscond with the money. On the other hand, if we have the case of A paying in money in advance mistakenly believing that the contract is for a car whereas B believes that the contract is for a van (and B delivers the van) the mistake of A’s will allow B to assert a defence against A’s claim for his money back if he dealt with it before the mistake was realised.

We must conclude this section by restating that all of this may be wrong and may be courts will hold defendants liable for knowing what they are receiving. Indeed in many cases the mistake may be mutual rather than wholly one-sided. However, it seems that, at least in the classic, core case of unjust enrichment the approach outlined here is the most consistent with libertarian principles. Finally, of course, parties may choose to vary their respective liability for an unjust enrichment by contract – for example if an existing customer makes an overpayment, the contract may specify a procedure for returning these funds or for allocating them towards future services.

Restrictive Transfers and Perpetuities

One further interesting topic is how restrictive transfers of property would be handled by a libertarian legal system. A restrictive transfer is any transfer that does not vest ownership of the property absolutely in the transferee. For example, A transfers the ownership of a car to B providing that B uses it only to travel to or from work; C transfers to D a house provided that he lets Mrs E, an elderly widow, have residence for life; F transfers a strip of land to G provided that G permits a right of way to the owner of the neighbouring land and the latter’s successors in title. All of these cases vest in someone other than the owner a residual title to the property that may be enforced under the terms of the transfer. Usually the transferee will have paid a lower purchase price than he would have done for outright title – after all, you would not pay the same price for a house with a restrictive covenant than you would for a house that confers upon you the right to do whatever you liked6. Hence he is not paying for a full transfer of title. In simple cases of restriction such as the doing or not doing something on a property then this residual title will remain with the transferor. Should the transferee proceed to carry out the prohibited act he has now violated the transferor’s residual title and the latter may sue. In cases where the contract confers a benefit upon a third party – e.g. the widow who may stay in residence for life or the neighbouring property that is granted a right of way – it is the third party who holds the title.

This brings us to the question of wills, bequests and trusts that are set up in apparent perpetuity for the benefit of certain beneficiaries or to carry out certain purposes. For example, a person may decide to bequeath all of his wealth to his eldest son, provided that the latter bequeaths it to his eldest son and then to the latter’s eldest son and so on forever. Or a person may stipulate that he will transfer land provided that neither the transferee nor his successors in title ever build on the land for the rest of eternity, even after the transferor is long dead. In all of these cases can the so-called “dead hand” of the settlor command rights and obligations over property for the remainder of time? Our contemporary legal systems have invoked perpetuity rules in order to prevent property from being tied up unreasonably into the distant future. Usually the interests bequeathed by all such  transfers must vest absolutely in the beneficiaries within a period of “lives in being” plus twenty-one years. Hence, inserted into bequests are bizarre “Victoria” or “Kennedy” clauses stipulating that the directions for the property will remain for as long as the lifespan of the youngest living descendant of Queen Victoria (or of Joseph P Kennedy) plus a period of twenty-one years. After that time any specified interest in the bequest is invalid and the property vests absolutely in the last, valid beneficiary.

Libertarian law has no need for such an absurd and artificial rule. All rights and obligations belong to living, individual human beings and the courts will not enforce a stipulation laid down long ago by a deceased person. How then are directions stipulated in wills or bequests enforced beyond the lifetime of the settlor? The answer, once again, is to look to the residual title of the transferor. When he dies, this title will be inherited by his heirs. The latter then have the choice to continue to enforce the restriction or to relinquish it. For example, if a person bequeaths money to a hospital for the sole purpose of providing care to the terminally ill, the restriction vests in the transferor a residual title to enforce that restriction. While the transferor is still alive he is likely to enforce it, of course. When he dies, however, that title passes to his heir who may decide to continue to enforce it or may negotiate with the hospital for its relinquishment. Should he choose to continue it – perhaps out of respect for the original transferor – it will then pass to his heirs, and so on. With a property restriction that, say, confers a right of way upon the owner of a neighbouring property and his successors in title, exactly the same kind of situation occurs. If the succeeding beneficiaries of the right of way down the generations wish to continue to benefit then they will proceed to enforce the right. If not then then they will arrange for its relinquishment (or, more likely, the beneficiary will sell the right to the owner of the burdened property and the latter will then own the property outright). As long as the heirs continue to enforce the residual title then the desire to use that property in the manner stipulated by the original transferor is not the desire of some long dead settlor but is, rather, that of real, living human beings. There is, therefore, no distinct problem of perpetuities in a libertarian legal order. In any case, as time moves on certain restrictions may become forgotten and unexercised. Succeeding property owners of land that benefits from a right of way over adjoining land may, after a few generations, be completely unaware of that right of way and will not use it. Indeed the owner of the burdened property may, in the same state of ignorance, block access to the right of way with no alarm from its supposed beneficiaries. In this case, the courts may take this as evidence of abandonment of the title and full, beneficial use of the restricted property reverts to its owner. This is a similar approach to what courts are likely to do when determining whether there has been an aggressive action against property in the first place – if the right was not exercised for a period of time then it demonstrates that the actors have no conflict in their minds and the defendant’s act, while physical in nature, generated no substantive invasion of rights. Hence we should also not have any problem of people “digging up” ancient documents, discovering long forgotten titles and then suddenly demanding their enforcement.

Finally, we must also remember the libertarian devotion to the market as opposed to the force of law that is the way of the statist. If people wish to donate their wealth to good causes or for specific purposes after they die and they wish this to be for at least a significant period in the future then suppliers of this need will be hot on their tail. Companies could offer to receive an individual’s money upon that person’s death and devote it to whichever purpose that individual wished. Legally, title to the property vests in the company absolutely but the discipline of the marketplace will ensure that they do not misuse it – if they do, people will, in the future, turn to more reliable competitors to whom to make their bequests and the abusive company will go bankrupt.

A Final Map of Libertarian Law

Having concluded our survey of causative events of legal liability in a libertarian legal system, we are now in a position to sketch an outline of the map of libertarian law and it categories.

There will be specific areas of the law devoted to determining what the property rights between the parties are, based upon libertarian principles. These are, namely:

  • The law of self-ownership;
  • The law of original appropriation;
  • The law of contract;
  • The law of unjust enrichment;

We might also include in this list the law of trusts although, as we indicated above, a trust is a property mechanism that results from various events and does not necessarily sit neatly in the above list. There might also be specific areas of the law devoted to incorporated associations such as companies.

All of these categories of law that determine the property distribution between the parties then feed into the central area of law which is the law of wrongs (torts and crimes). The previous categories having established what the property rights are, this area of the law determines whether there was an aggression against that property as we outlined in part four. Notice that there is no separate procedure for criminal and tortious acts as there is in our contemporary legal systems – the investigation of aggression is a unified whole and proceeds in one direction; the distinction between crime and tort is only one question to be examined in this process.

These areas mark the extent of that which we have investigated thus far. There will also be specific areas of the law that determine appropriate remedies for an aggression against property, part of which, in addition to theories of compensation and restitution, will have to examine libertarian theories of punishment and the viability of introducing punishment as a response to an invasion against property.

We can conclude by noting that nothing in this brief sketch includes any mention of “public law” or laws that apply to state, government, administrative or statutory bodies. All law in a libertarian society is “private law”; all legal rights and obligations exist between individual human beings and all of this law rests upon the same principles that are binding upon everyone regardless of their societal status and function. No individual human will be either privileged or persecuted by a libertarian legal system.

View the video version of this post.

1However, the precise causative events that give rise to some of these trusts appear relatively unclear in the case law, probably because trusts were developed in Equity which was based on much more vague and loose principles than the common law. “Unconscionable behaviour” seems to be a favourite phrase that courts use to justify the imposition of a constructive trust.

2None of this terminology need necessarily be used in a libertarian legal system – we are using it here simply for clarity.

3Actually, the bottle was not purchased by the plaintiff but by her friend who was accompanying her; it is also the case that the plaintiff sued the manufacturer of the bottle, not the immediate vendor – we will remove these complications for the sake of simplicity but suffice it to say that they do not present any problem to the analysis.

4This may sound similar to the “absence of basis” approach of contemporary legal systems, but whereas this concept is vague and unanchored in the crucial libertarian concept of property, our doctrine is certain – either there is a “mistaken” transfer or there is a valid declaration of transfer. Only one or the other can occur and they are mutually exclusive.

5Considerations as to whether a defendant “should” have made himself aware of the mistake are likely to be irrelevant – a court cannot force an individual or entity to look after its financial or proprietary affairs with any particular degree of care. Other, extra-legal considerations are likely to bring this about – businesses will want to keep accurate records in order to keep customers satisfied by stating accurately the contractual relations and the accounts between them.

6In some circumstances, however, such a covenant may serve to increase the value of a property. For example, the covenant may apply to all properties in, say, a housing development programme and will be designed to restrict and curtail certain activities in order to give a neighbourhood a certain quality and attractiveness.

Libertarian Law and Legal Systems Part Three – Consent and Contract

2 Comments

We will begin our survey of the causative events of legal liability in a libertarian legal system with those that arise from consent because, even though people may view “the law” as being synonymous with wrongs such as crimes and torts, consensual legal relations are, in fact, the most frequent types of social interaction that arise in an individual’s life. The predominant form of legal relations arising from consent is, of course, the contract; a person may enter tens of these contracts every single day by, for example, just purchasing a coffee, a bus ticket, or lunch, whereas most people would scarcely commit a single crime in their entire lives (although the latter becomes less likely in our actual world where governments spill oceans of ink in criminalising, through legislation, even the most innocuous of actions). While any good legal system must have strong proscriptions against horrific acts such as murder and rape, it is the contract that is the primary preoccupation of everyone’s daily lives.

The first question to consider, then, is precisely what is a contract? Although it should be clear that all contracts concern some sort of bilateral arrangement, different legal systems have varying and often elaborate definitions. In English law and in common law systems generally, contracts are agreements or promises made with consideration, that is, some form of good or service that is exchanged (alternatively, deeds can be signed to bind agreements made without consideration). There is, therefore a high degree of freedom of contract with the emphasis of the law being more on the question of the enforceability of the performance specified by the contract. The more prescriptive civil law jurisdictions, on the other hand, are more concerned with the precise rights and obligations that arise as a result of the contract. Further, the bases upon which the legitimacy of contracts rests are also varied and numerous. For example, is it because the promisor intended to be bound in some way, or because the promisee relied upon the promise in order to arrange his affairs in a manner in which he would not have done so but for the promise? Are contracts even promises at all, or are they agreements, and what is the difference? We do not have the space to enter a discussion of the shortcomings of most of these definitions of contracts and their bases of legitimacy1. But for libertarians it should be clear that none of them have much to do with the key concept of property with which all legal relations in a libertarian world are concerned (although the requirement of consideration in English law bears some resemblance to it). What, then, is this essential element of property in contractual relations?

We all know, as “Austrian” economists, that humans act so as to direct scarce resources available to their most highly valued ends. Libertarian theory states that you may do this unilaterally so long as the goods to which you are subjecting your action are ownerless and are, therefore, unvalued by anyone else. We can each arrange ownerless resources to meet our needs in any fashion we like without running into conflicts with other people. However, in a world of interpersonal scarcity, we find ourselves in the position of desiring and coveting the goods that are owned by other people. We would prefer a particular good to be moved to meeting our ends and away from those of the current owner. But libertarian ethics prevents us from unilaterally making goods owned by someone else the object of our action, for then we are invading his property and violating the non-aggression principle. Rather, we have to secure the consent of the owner to move that property from meeting his ends towards meeting ours. The basic purpose of a contract, therefore, is to procure someone else to voluntarily deal with his property in a way other than he is doing so at the moment. It is a method by which we can legitimately secure property that is owned by someone else towards meeting our ends. Contracts are, in effect, extended actions, the extension of gaining consent being necessary in order to overcome the “hurdle” of the title over the property claimed by the existing owner. Normally the securing of this consent requires a “tit for tat” arrangement – “If you will sell me a bar of chocolate, I will pay you 50p”; or “If you pay me £20 I will mow your lawn”. However, this needn’t be so, nor does the initiator of the exchange have to be the one who wishes to get his hands on someone else’s property. As we shall see, gifts are a valid form of contract but in this case it is normally the donor and not the recipient who proposes that a gift should be made.

Why, however, do contracts have the force of law? If they are to be violently enforced then any breach of a contract would necessarily have to be a violation of the non-aggression principle otherwise, in a libertarian world, only non-violent methods of enforcement could be resorted to. The reason is that the contracting party is not just agreeing to do something with his property – rather, he is purporting to grant a title over the property to you. At its fullest extent this may be an exchange of the full title of ownership from him to you, completely extinguishing his title and furnishing you with 100% ownership. However it needn’t necessarily be so – leasehold titles (or the “renting” of durable goods) and easement rights would be valid titles exchanged by contract. Because the owner of property has granted you a title over that property any subsequent interference in that title by him is a breach of your property rights and a violation of the non-aggression principle. Thus, in a libertarian world, it may be enforced by legal sanction.

Contracts, therefore are exchanges, or transfers of title to property. This definition of a contract may be known to readers who are familiar with the “title transfer” theory of contract. Nevertheless there needn’t be a strict “title” to the property in the sense with which this word is understood in contemporary legal systems. It is typical, in economics, to make a distinction between goods on the one hand and services on the other, a good, for example, being an apple that can be eaten whereas a service being, say, a ride in a taxi cab. Legally I would have title to the apple but I would not have title to the taxi cab. Yet all goods are valued for the service that they offer – the apple for the satiating of my hunger and the taxi for its transportation of me from A to B. There is no value inherent in goods, rather the value always springs from the service it is able to achieve in meeting the fulfilment of an end. The distinction arises because “goods” typically service those ends that we can only satisfy from complete ownership – i.e. a title over – and use of the servicing good. I cannot borrow, eat and then return the same apple at a later date – rather, I have to own it in its entirety. “Services”, on the other hand, are those goods that service ends that can be satisfied without complete ownership. Contemporary legal systems do not say that I own or lease a taxi in order to satisfy my end of getting from A to B; nevertheless, I do obtain possession of it for a period of time. Similarly, if I am an employer a legal system would not say that I “own” the labour of my employee. Colloquially, in each case, I might say that I have “hired” a taxi or “hired” my employee but legal systems confer no formal title to either of these things upon me. How libertarian legal systems might unscramble these problems we shall see below.

In order to be the subject of a contract the property exchanged must be alienable from the original owner because transfer of the title requires the abandonment of that good. With the hiring or leasing out of a good the good in its entirety is not, of course, abandoned by the original owner, merely the good’s productive services for the duration of the period of hire. As we shall see labour contracts can be enforced as exchanges of money in return for the performance of the service of labour. Whether or not a person has the ability to entirely alienate from himself the productive services of his body and to transfer them as property (i.e. enter into a contract of slavery) is a contentious area of libertarian theory that we cannot hope to resolve here. Nevertheless we must recognise the fact that libertarian courts will face it as a question.

The contract, therefore, is the execution of the transfer of title from one person to another – it is the instrument that gives it legal recognition. Anything interpreted as being preliminary to an execution of transfer on the part of the transferring party – the promise to transfer, the desire to transfer, the wish to transfer, the hope to transfer, and so on – does not suffice as a contract. It is typical to justify this on the grounds that recognising a promise or statement of desire as a contract would require a person to bind, and thus alienate, his will, something which cannot be done. While may be true, a simpler explanation is that as the statement or promise has not executed transfer of the actual good under consideration, there must, in a libertarian legal system, be some other property that is transferred if there is to be a valid contract. This can only be the thought or desire expressed by the transferring party. But as we noted above, thoughts, feelings, desires and so on are not tangible property and are not capable of ownership. A fortiori they cannot, therefore, be transferred. These thoughts and feelings do, of course, reside in the physical matter of the brain, but aside from the inability to identify and isolate the specific cerebral matter in which these thoughts reside few contracting parties are likely to be intent upon transferring a physical part of their most vital organ. In the absence of any conduct that indicates an actual transfer of tangible property that is the subject of the statement of desire or promise, there will be no contract in a libertarian legal system. Precisely what this conduct will be is for a libertarian courts to decide. This does not mean to say, of course, that promises or expressions of desire do not have moral force even though they lack legal force. We are not stating that a person would not be behaving badly by reneging on his promise; we are merely stating that he may not be subject legal sanction – i.e. the use of force – as a response to this withdrawal. There is also the possibility that agreements masquerading as promises or giving the appearance of promises will be given recognition as contracts by a libertarian court, particularly where the subject matter is clear and unambiguous and the difference turns only on a matter of words. For example, consider the two statements:

“I will transfer £100 to you on Thursday”

“I promise I will transfer £100 to you on Thursday”

The first statement would ordinarily be binding upon the transferring party, the second one would not. However libertarian courts may be loath to dismiss the second as being without legal consequence simply by the insertion of the word “promise”. What has to be remembered is that the entire conduct of the individual is considered and merely because he used the word “promise” does not necessarily mean that he did not intend to action a transfer of title to the £100. For example, if the statement was an off-the-cuff remark then it may be held to be a promise; on the other hand, if it was the conclusion of drawn out negotiations then it may be held to be a binding contract.

It is important to realise that the property need not be in existence or under the legal ownership of the transferring party at the time of contract. If I contract someone to clean my car next week for a sum of money, payable upon completion, I might not have the money now but will do so by the time I come to make payment. Similarly, I might agree to sell someone a car in one month that I do not own now but will be required to arrange for ownership of it before the transfer date. Parties to contracts need to judge, individually, the risk of default involved in entering such contracts. A standard commercial solution that has emerged in our contemporary legal systems is the thirty day credit period where a supplier will transfer a good on day one, will invoice the recipient and the latter will be required to make payment in cash – not existing in the debtor’s possession at the time of the contract – within thirty days. Furthermore, it should be clear that there is no reason why libertarian courts would not recognise transfers taking effect at a future date, so long as the action of the transferring party was interpreted as a statement of transfer and not as mere promise or wish.

Finally, contracts can be oral or written; the difference may, of course, have evidential impacts but as long as the facts of a case are agreed the precise form of the contract makes little difference upon the questions of law.

Types of Contract

Let us therefore investigate the types of situation in which contracts may arise and where a libertarian legal system will be required to interpret and determine the legal outcomes for. There are five such possible situations:

  • The unilateral declaration of transfer of a good (i.e. a “gift”);
  • The exchange of a good for another good;
  • The exchange of a good for the performance of a service;
  • The exchange of a performance of a service for the performance of a service;
  • The unilateral declaration of the performance of a service.

Each of these situations involves the intention to transfer at least a portion of the productive services of property to another individual.

First of all, the gift contract is relatively straightforward – a simple declaration of transfer of property by an individual without any action necessary on the part of the recipient. It is clear in this instance precisely what the property is and who should own it as a result of the transfer – for property is being transferred in a single direction without condition. Even though the receiving party has done nothing he may now (or at a specified date of transfer) consider the title to the property his. He may, of course, refuse, in which case the property would either revert to the transferring party or would simply become abandoned. If, however, the transferring party retain possession of the property it is clear that he has now absconded with what is somebody else’s property – hence he can be compelled by legal remedy – i.e. violent enforcement – to rectify that situation. Possible remedies we shall explore below. Matters become a little more complicated when a good is exchanged in return for another good. There are several ways in which this could, theoretically, take effect. The first is for each party to declare in the contract the transfer of each other’s property, for example, “A hereby transfers to B title to a sum of £100 to B and B hereby transfers to A title to a television set”. Although this could be applied to some situations such a contract appears to be more like two unilateral declarations of transfer (i.e. two simultaneous gifts) than a contract of exchange and this does not correctly interpret the intentions of the parties to the exchange. Few people would suggest that when you buy something in a shop you are “exchanging gifts” as opposed to engaging in mutual trade. People are not simply transferring their property in the hope of getting something back – rather, the transfer of title becomes conditional upon getting something back and title only transfers when something is given back. In other words A will only transfer a sum of £100 to B if B will transfer the title to a television set to A. Very few transactions are physically simultaneous – somebody usually has to transfer their property before they receive the other party’s property in return. Even in a shop when the period of transaction is very short, either the purchaser has to hand over the money before he gets the good or the shopkeeper has to hand over the good before he gets the money. A conditional exchange prevents title to your property passing until the other side fulfils his half of the bargain. Precisely which titles pass and when depends upon the wording of the contract. The contract may specify that B’s transfer to A of the title to a television set will be made upon the transfer of £100 by A to B – in other words, title to the money has to pass first. If B delivers the television set to A in advance then title to the set does not pass; if A defaults, then under this wording the television set is the property which B retains title over (i.e. he gains no title to the money that should have been paid for it). If, on the other hand, A pays in advance then title to the money transfers from A to B immediately and title to the television set transfers from B to A; the television set is now properly A’s and B is required to deliver it. However, if the wording of the contract was the other way round – that A’s transfer to B of the title to money will be made upon the transfer of the television set by B to A – then the situation is reversed and now it is title to the television set that must pass first. If B delivers the television set in advance of payment then it is the £100 that is now his and not the television set; if A pays in advance then he retains title to the £100 until the television set is transferred. Much of this is, of course, theoretical as when it comes to dealing with a defaulting party your primary interest is in pursuing the course of action that gives you the greatest chance of some sort of recovery rather than relentlessly striving after the very property that is yours. Indeed, as we shall see below, most commercial contracts will state the situation that occurs in default by specifying precisely which title exchanges will occur in all possible actions of each party (if person A pays, outcome X will result; if person A does not pay, outcome Y will result, etc.) Nevertheless this theoretical clarity is important for understanding the foundations of the libertarian law of contract and how it is fundamentally based upon the concept of property. Furthermore, we might say that the hire of durable goods – including the leasing of land – falls under this category. The good is not transferred in its entirety but the degree and length of possession transferred is significant enough to confer a leasehold title to the property upon the recipient.

Given this, should not the third type of situation – the transfer of a good in exchange for the performance of a service – fall into the second? As we outlined above, all services depend upon property to carry them out and the recipient of the service is, in effect, hiring the property for the duration of the period of time in which the service is performed – a ride in a taxi being a good example. However, unlike the lease of land, we never say that a person gains title to a taxi and its driver even though in theory we might say that he should so gain. The reason is likely to be precisely as we stated in part one – that legal rules and principles are determined not only by what should be applied in theory but by that which accords with custom, tradition and practical expedience. The rights which result from conflicts arising from scarcity are only those rights that people demand; no one demands rights over goods that are not scarce because there is no conflict over these goods. Where the goods are scarce, however, we must remember that the enforcement of titles and ownership rights, followed by any subsequent remedial action, is itself costly and burdensome. There will, therefore, always be a category of scarce goods where the economic benefit is low and the cost of recovery high so that the conferring of formal titles would be wasteful. It is reasonable to speculate that services fall into this category. A ride in a taxi is of such short duration, the economic benefit minor, and with dozens of rides being carried out for different people every day, people are not willing to demand the security of a formal title in order to resolve any arising conflict. If, on the other hand, taxi rides were to become crucial to welfare or desperately scarce then formal titles may become worthwhile for this purpose. A more likely scenario is if someone wishes to hire a taxi for a number of days in order ferry important guests to and from various functions in which case a formal hire title may be necessary. The same phenomenon will be in operation when the goods providing the services are not delegated exclusively to the possession of the beneficiary. A professional accountant, for example, may deal with dozens of clients from his single office and may switch back and forth between work for a number of them in a single day. Working out a system of titles in such a case would be not only arduous and costly but close to impossible.

In the absence, therefore, of a formal title to the goods providing the service what security is available to the recipient of the service? If he is transferring a good in exchange for the service it is likely that courts recognise this contract as a conditional transfer of the good – for example, A will transfer £5 if B gives him a ride in the taxi. If A does not get his taxi ride then he keeps his money, i.e. title to the money does not pass to B until the journey is complete, regardless of when payment is actually made. This latter aspect is especially important for services that are delivered over a long period of time such as a development or consultancy. Down payments or deposits will be required so that the developer can fund his operations for the period of service but should he fail to deliver then the contracting party can sue for return of the funds as the latter remain his property.

Matters become a little more difficult in the fourth type of situation – that of a performance of a service in return for the performance of a service. For example, A will mow B’s lawn if B gives A a ride in B’s taxi cab. Other examples might be more extensive – A will provide B with consultancy services for a year if B will provide A with IT services. Such contracts are, again, conditional exchanges from which the recipients benefit except that no formal title to property passes. In pure theory no contract should be recognised in this situation because of the lack of the property element. Nevertheless, we can analyse some of the considerations a libertarian legal system may have to face in determining the outcomes of these situations. First, we can say that, as we explained above, the absence of intention to transfer formal titles demonstrates that the parties place a relatively low value on gaining the outcome. It might not matter, for instance, if A mows B’s lawn once but does not gain his taxi ride. In most cases these situations are likely to be cases where the parties are not dealing at arms’ length but are, rather, friends or relatives and where a resulting legal remedy is not intended. In English contract law there is a separate doctrine of “intention to create legal relations” that has led to many problems where the exchange of goods has not been recognised as a contract because the familiarity between the parties has been held to preclude any legal remedy. This is not relevant under libertarian law where the intention to exchange titles to property is an intention to create legal relations and where the exchange of a service for a service manifestly demonstrates an intention not to create such relations. The conferring of a property title demonstrates in the parties the desire for the security of the legitimacy to use force in order to gain the fulfilment of their ends. Where this is absent and there are no formal property dealings then it is reasonable for a court to conclude that such security was not required. Parties always have the option of concluding their arrangements with formal, enforceable titles if they deem the outcome of the contract to be valuable enough; where they do not then they should not expect the remedy of violent enforcement to come to their aid. Libertarian courts will therefore have no problem in recognising contracts between parties who are not dealing at arm’s length (i.e friends and relatives) where titles to property are transferred and any separate doctrine of intention to create legal relations is redundant. Where the provision of services is extended or gives the appearance of having a high monetary value libertarian courts may be willing to recognise an exchange of title if the performance of the service appears to give de facto exclusivity or possession to the recipient over the property that executes it. Again, we must stress that it is the entire conduct of the parties to the agreement that matters and not simply the words that are on the face of the contract (so, in other words, a knowledgeable party could not try to take advantage of an ignorant party by calling what is a transfer of title the performance of a service). Nevertheless, the granting of contractual liability in such cases is likely to be very limited in scope.

It follows from this that the fifth type of situation – the unilateral declaration of a performance of a service – also cannot be an enforceable contract. With regards to both the fourth and fifth situations we can see that any application of contract law to this situation would result in the most innocuous of agreements and declarations falling within the ambit of enforceable contracts. “I will help you with the shopping this afternoon”; “I will meet you in town at 7pm”; “I will clean the bathroom on Sunday”. Absent any demonstrable intention to create titles over property that perform these services the law has no business in these situations.

Breach of Contract and Contractual Remedies

While the focus on this series of essays is on the grounds on which legal liability is recognised and not on legal remedies, it is nevertheless appropriate to consider precisely what the law may compel a contracting party to do in the event that he defaults or breaches a contract. The first and, from the point of view of the receiving party, most ideal outcome is specific performance – full and final delivery of the property that is transferred by the contract. The property belongs to the receiving party and he has the right to compel its transfer. But once again, legal principles will be formed with regards to practical expediency as well as pure theory. Legal proceedings and legal recovery are, as we mentioned above, costly in their own right and very often the path pursued will be that which gives the greatest chance of recovery for the recipient with the lowest cost. In the first place, specific performance may not be available at all where the property has ceased to exist, or has been damaged or altered, a situation which is most likely in the case of perishable goods. In cases where the property has been transferred to a third party, or its location has moved considerably, the cost of recovery may render specific performance difficult and expensive3. In most cases where the property in its original form is no longer in the debtor’s possession, the easier outcome will be to sue for compensation or what has been come to be known in contemporary legal systems as damages – the monetary equivalent of the property that was due. Especially if there are proceeds from the sale of the property to a third party this might provide the greatest chance of recovery. Alternatively, the court may order seizure of other goods in the debtor’s possession to be sold for their monetary value in order to pay the necessary compensation. In English law there are several rationales for why damages should be paid and at least one of them will be prominent in a single case. First, to pay the so-called “reliance interest” of the recipient – i.e. so that the contract is effectively rescinded or “unscrambled” as a result of the breach and someone gets back what they put into the bargain; secondly, to pay the “expectation interest” – that which the receiving party expected to gain from the deal; and finally, restitutionary damages attempt to disgorge from the breaching party any profit he made as a result of the breach. Libertarian law largely transcends these categories. A party is entitled to recover the property that it is legally his as a result of the contract and nothing more; failing this, he may receive its monetary equivalent in damages. On occasions when he is the party receiving the property he will get what he hoped to gain; where he is the party transferring property he will get back what he originally had. Restitutionary cases may be more complex as, properly considered, they are really a part of the wider category of punitive damages. Any punitive or exemplary damages are unlikely to be awarded in the absence of an intention to breach a contract that renders the default as an act of fraud, a consideration we shall explore below.

Under the rule that a person is entitled to recover from a breach of contract only the property that is legally his as a result of that agreement, it should be clear that in most cases “consequential loss” or recovery of further expenditure incurred as a result of the contract is not available to the plaintiff. For example, a person hires an architect to design a building in return for a sum of £100K, and a further £500K is spent on building materials and hiring other services. Before the project can be completed the architect breaches his contract and the project is forced to a halt. The plaintiff can only recover from the architect the £100K paid across to him in return for his architectural services; he cannot recover the £500K spent on reliance of the architect’s performance. The additional £500K forms no part of the property specified in the contract with the architect. In these cases, the likely initiative taken by informed parties, at least, is to arrange the transfer of titles to property to account for all possible actions of each party. The contract with the architect might therefore state “A transfers to B £100K if B performs architectural services for A for project X; if B does not perform architectural services for A for project X then B will transfer to A 50% of the costs incurred by A for project X”. It is always possible, therefore, for parties to structure the property arrangements to account for any envisaged scenario. A court will then interpret the contract against the facts in order to determine and enforce a property arrangement in the result of default or dispute. It should be clear that this also permits penalty clauses – usually precluded in English contract law – to be established in contracts. The contract with the architect could quite easily have said that B will transfer to A 200% of the costs of project X incurred by A in the event that A fails to perform his services. The insertion and acceptance of such clauses in contracts merely indicates the value that is placed on performance by each party and their eagerness to get their hands on each other’s property. Such arrangements are entirely consistent with libertarian property principles.

In sum, based upon both the considerations of theory and of practical expediency, we might state therefore that, under libertarian contract law, a contracting party has a primary obligation to pay the property that is the subject of the contract, and a secondary obligation to pay compensatory damages as an equivalent. This is subject to the further consideration of how, precisely, libertarian courts will classify the status of a defaulting debtor – is he, for example, a thief of what is now the property of the other contracting party and, thus, a criminal who should be subjected to some sort of punishment? Or does he bear something resembling civil liability in our contemporary legal systems and need only furnish compensation? Part of this difficulty stems from the classification of wrongs – that is, for a libertarian, breaches of the non-aggression principle – into crimes or torts. Rothbard, for example, practically abolishes the distinction, upgrading what in contemporary legal systems are described as “torts” (invasions of person and property) to “crimes”, and dismissing altogether the current legal categorisation of crimes as wrongs against the state4. However he then has to admit that all defaulting contractual parties, regardless of the circumstances, are “thieves” who have “stolen” the property of the other party. Faced with the conclusion that a defaulting debtor, who has been unable to pay because of mere hardship or unfortunate circumstances, should be thrown into debtors’ prison he merely states that this would be “beyond proportional punishment”5. This creates the confusing possibility that different legal responses can flow from the same grounds of legal liability. It is conceptually clearer, however, to recognise varying grounds of liability which individually begat uniform responses. As we shall argue in part four of our series there is a case to be made for retaining the distinction between criminal and tortious liability based upon the intention (as objectively viewed by the court) of the defaulting party. If his conduct indicates that he deliberately intended to abscond with the property that he owes (i.e. is a fraudster) then he should be regarded as a criminal and subject to higher sanction. If, on the other hand, he has done his level best to make ends meet and defaults simply because of poor business choices then it is more likely that he would be subject to the equivalent of civil liability. Libertarian legal systems are likely to recognise that it would be a travesty of justice to equate the two situations, and may go further and acknowledge gradations of liability between the two extremes. Unreliable and bad with financial affairs a person may be but this does mean that he should be branded as a dishonest thief who cares for nothing more than himself.

It is at this point where we can return to the consideration of punitive and restitutionary damages. Where a person has not intended to be in the position of being unable to pay the property to the debtor then these damages would clearly be unavailable. Similarly where the property under dispute was a small part of a much larger operation with legitimate property that earned a profit, it would be unjust to disgorge the entirety of the profit from the debtor. More difficult, however, is where the intention of the defaulting party has been to defraud the property owner or where the property has uniquely and with little aid earned a profit for the debtor. In these cases libertarian courts might recognise a punitive or restitutionary element in accordance with an accepted theory of punishment that is compatible with libertarian principles. Consideration of this is beyond the scope of this essay, but we must acknowledge its possibility. Finally, there is also the possibility that fraud or theft might void the entire contractual arrangement and the case will simply be one of a unilateral breach of the non-aggression principle by the defaulting party, i.e. a simply wrong rather than a breach of contract.

Minor Considerations

We can conclude this survey of the law of consent by turning our attention towards some minor considerations.

First of all, there should be no problem with third parties enforcing their rights to property that they acquire as a result of a contract between two other people. For example, A may agree with B that A will pay C £100 if B transfers a television set to A. If B so transfers the television set then title to the £100 is now properly C’s and C can sue for its delivery.

Second is the “problem” of so-called unfair contract terms. These are usually exclusion clauses that relieve the debtor of any excessive burden of liability in the event of a default. In principle there is nothing unjust, from a libertarian point of view, of such clauses if they are agreed to in the contract. All that they would do is specify with objective certainty where the property rights would lie should events X, Y or Z occur. From an economic view, such certainty is designed to avoid the costs of litigating or arbitrating a dispute should the debtor fail to perform. Thus we might say that such clauses grease the wheels of commerce so that every party knows where they stand in the event of a default and the result of every outcome can be ascertained. Particularly if the debtor is a large and complex concern such a corporation, open-ended or uncertain liability in just a single case may bring operations to a complete halt if that case is representative of the corporation’s entire customer base. There is, of course, the possibility that large and knowledgeable parties will include or exclude all manner of terms in the “small print” of a large contract in order to burden the other party. The only tool available to a libertarian court in order to strike these terms from the contract is to find that they were not incorporated as terms in the first place – i.e. they did not form part of the contract at all. Other than that such terms, in a libertarian world, will be subject to legal sanction. This does not mean, however, that there is absolutely no regulation at all of burdensome contractual liability. We are simply saying that the law – the enforcement of rights through violent measures – has no part of it. We must remember that law, legislation and force are the ways of the statist and that this is precisely what we wish to avoid in a libertarian world. Only those acts that breach the non-aggression principle may be subject to the force of law. Where acts do not do this – such as the inclusion of “unfair” terms in a freely accepted contract – then there are plenty of ways of regulating this through voluntary trade. The first is the competition of the marketplace itself. Traders whose standard terms are too harsh will lose out to those who offer laxer terms. Secondly, there is every possibility that contractual scrutiny will be undertaken by private consumer watchdogs and ratings agencies who will refuse to accredit or will otherwise highlight companies who fail to moderate their standard terms of contract. Regulation, in a libertarian world, does not take the form of force and violence but, rather, through better informing you of the options that you can choose. A libertarian legal system will not relieve you of your personal responsibility by voiding a contract that you entered freely but now deem to be “unfair”.

In this vein we can also consider misrepresentation. It should be clear that any representation that induces a party to enter a contract must itself be a term of the contract to the extent that it specifies the nature of the property being transferred. For example, X is induced to buy a washing machine from Y as a result of the inducement that it would “last ten years”. If it only lasts five years, then what can X do? In order to sue for a return of his money, the contract would have to specify that the property transferred was “a washing machine that would last ten years”. If the machine lasts only five years then Y has defaulted as he did not deliver the property that was the subject of the contract. On the other hand, if the contract only purported to transfer “a washing machine” then X has no remedy as a washing machine is precisely what he got. The fact that he relied upon Y’s statement that the machine would last ten years is irrelevant. Of course, guarantees, warranties and other collateral arrangements would serve to protect X in this situation and are perfectly compatible with a libertarian legal order.

Finally, space precludes us from considering many other interesting areas – such as implied terms (i.e. good faith), mistake, frustration of contract, and so on. However what we have expounded should be the general foundations of contract in a libertarian society.

View the video version of this post.

1For a detailed description and analysis of bases of contractual enforceability, see Randy E Barnett, A Consent Theory of Contract, 86 CLMLR 269.

2See Murray N Rothbard, The Ethics of Liberty, pp. 134-5.

3If the property has been transferred to a third party then a court may, of course, compel the third party to return the property to its rightful owner. Space precludes us from examining the justice of this outcome in detail here. Suffice it to say here that an individual cannot transfer to another person title to property that the former does not possess in the first place. Hence the third party receives no valid title.

4See Rothbard, p. 51, note 1; Murray N Rothbard, Law, Property Rights, and Air Pollution, Cato Journal 2, no. 1 (Spring 1982): 55-99, reprinted in Economic Controversies, pp. 367-418, at p. 409.

5Rothbard, Ethics, p. 144.

 

Libertarian Law and Legal Systems Part Two – Self-Ownership and Original Appropriation

Leave a comment

In part one of this five-part series we outlined some preliminary considerations concerning how a libertarian legal system might unfold and develop. We are now in a position to begin exploring the causative events of legal liability in a legal order governed by libertarian prescription.

Prior to considering any specific area of the law such as tort or contract we must explore the ways in which a libertarian legal system will recognise and enforce self-ownership and also the original appropriation of previously ownerless goods. Technically speaking, the latter topic at least could be covered as part of the law of consent. Both self-ownership and titles over goods allow their owner to not only enjoy the productive services flowing from his body and external goods, but equally and oppositely they burden him with the responsibility of ensuring that, through his actions, those goods do not physically interfere with the person and property of anybody else, otherwise he breaches the non-aggression principle – and there is likely to be at least prima facie liability of the owner if property belonging to him is found to have physically interfered with the person or property of somebody else. In the same way that it is unjust to physically interfere with someone else’s property, so too is it unjust to hold someone responsible for property that he has not voluntarily assumed to be his or to have asserted control over through his actions. For example, if the brakes of a car fail and the car rolls down hill before striking a person you are responsible only if it is your car and hence have responsibility for ensuring that its brakes are fully functional. It would be a travesty of justice if, barring any special circumstance, you were held legally liable for someone else causing an accident with their car that they were supposed to maintain. In short, people should not be burdened with the ownership of goods when they have not voluntarily assumed that burden, either by original appropriation or by contract. Nevertheless we will confine our discussion of the law of consent to bilateral arrangements such as contracts and concentrate here on unilateral incurrence of rights and obligations. Our first task, therefore, is to understand very clearly how a libertarian legal system will recognise bodily ownership on the one hand and the original appropriation of previously ownerless goods on the other. As we mentioned in part one we have justified elsewhere these concepts of self-ownership and homesteading of previously ownerless goods, and we will not attempt to further justify them here. We will only assume their equity to be true as our task here is to explain how a libertarian legal system will come to recognise and enforce them or, at the very least, we will enunciate the issues that such a system will face in so doing.

Legal Persons and Self-Ownership

The fundamental task for any legal system, then, is to recognise which entities are legal persons and which are not – legal persons being those who can enjoy rights on the one hand and can be burdened with obligations on the other. In other words who is it who has the ability to both enforce his rights and also bear the responsibility of adhering to his obligations? In libertarian theory it is those entities that demonstrate rational action that possess self-ownership. Such action is demonstrative of desires and choices that lead to action that utilises means to realise ends without being governed purely by instinct, by reflexive impulses or simply by the inertia of external force such as the wind or gravity. Any libertarian legal system is therefore required to determine which entities demonstrate rational action so that they may enjoy both the benefits and burdens of self-ownership. As we stated in part one, it will never be sufficient for an entity to simply possess choices, desires, ends and so on; rather, these have to be publically evidenced and acknowledgeable. Rocks, for example, might possess rational thoughts and feelings that our current level of scientific understanding is unable to detect but the inability of a rock to demonstrate these thoughts and feelings through objectively viewable action renders it outside the category of legal persons. Every human needs to act now and to know what his rights and obligations are now, and the mere possibility that another entity could be discovered to have rational thoughts in the future is not sufficient. The alternative would be to tip toe around every piece of matter and, effectively, to never act at all and thus condemn oneself and the rest of the human race to death. With the requirement of rational action, therefore, it is critical that there is in fact any action at all as much as it is that the action should be rational.

When interpreting this action in order to recognise self-ownership, the basic rule of thumb for the majority of human beings is likely to be “can the person appeal for an enforcement of his rights?” In other words, conflicts over scarcity and the resulting legal disputes with an appeal to morality and justice only arise precisely because the parties to the conflict are able to demonstrate rational action. When a cheetah kills an antelope the antelope’s relatives do not gather together a high council of antelope judiciary ready to subject the delinquent predator to trial. Nor does a human being demand justice from a dog if it bites him (although he may, of course, sue the dog’s owner). Questions of justice arise only between those who are able to appeal to it, such an appeal itself being a rational action. While a libertarian legal system will, of course, have to face the difficult questions of the rights of foetuses, very young children and the mentally disabled (i.e. entities that we regard as human or at least consisting of human tissue but nevertheless may currently lack the ability to demonstrate rational action), it is not likely to be the recognition of individual humans as legal persons that is the greatest problem to preserving liberty. After all, our current statist legal systems cope with recognising the legal status of healthy adults, children, the mentally disabled, and so on, although the rights of unborn babies are still hotly debated. Indeed, we might even say that in some cases the benefits of legal personage are granted too freely when we consider that legislatures and courts often recognise animals (which may demonstrate some similarity to human behaviour but otherwise demonstrate no capability of rational action) as possessing rights. From the point of view of preserving liberty, it is suggested that the more urgent task for a libertarian legal system is not to define which entities are legal persons but, rather, to preserve the content of the rights that a legal person enjoys. In our statist world today we can quite clearly see that it is mostly the dilution of a person’s rights that leads to the loss of that person’s liberty and not the classification of a person as being “without rights”1. What each person appears to be able to enjoy in contemporary legal systems is not self-ownership and the right to private property; instead, it is a concoction of artificial and invented rights and obligations that are bracketed under the term human rights. Human rights, however, are never termed in such a way as to confer their full, irrevocable benefit upon each individual human; rather they are a buffet-selection of open-ended and often contradictory ends that, in most cases, should properly be categorised as goods rather than rights or freedoms. The so-called “right to life”, for example, could mean anything from your right not to be purposefully killed all the way up to your right to demand positive sustenance to keep you alive, the latter breaching the rights of somebody else. Your “right to free speech” may allow you to speak openly against government but does it permit you to break into someone’s house and force them to endure a lecture, thus invading their “right to privacy”? It is left up to government to determine whose rights in these situations should be upheld and whose should yield, meaning that no one truly enjoys any rights at all except by government gift. This is clearly insufficient in a libertarian legal system. Whoever is endowed with the term legal person is entitled to the full and unbridgeable right to self-ownership and to ownership of the goods of which he is the first owner-occupier or the latter’s voluntary successor in title, not some charter of ends that the court has to take it upon itself to balance. There may be some modification of this position in order to accommodate, for example, children who are not yet able to demonstrate rational action to its fullest extent. But for regular, healthy adults the entirety of their right to self-ownership and their full obligation to preserve the self-ownership of other individuals should be applied without exception. Any laws or norms that breach this principle would be invalid as libertarian laws2.

Original Appropriation of Goods

A libertarian legal system having determined which entities are legal persons, it will then be required to determine how legal ownership of previously ownerless goods will be recognised. There are several criteria that a libertarian legal system is likely to require:

  1. There is a tangible good;
  2. Ownership of the good is claimed by a legal person;
  3. The legal person has put the good to productive use;
  4. The productive use has ring-fenced the good from matter not put to productive use;
  5. The good is ownerless.

The first criterion – that there should be a tangible good – might seem trite, but it is worth emphasising that there needs to be matter that is the subject of a physical conflict. While contracts, as we shall see in part three, can deal with property that is not yet in existence but is proposed to come into the ownership of one of the contracting parties in the future, it is clear that claims of present ownership must be over existing goods. Not only will this requirement exclude unreal or imagined entities or objects, but so too will it not capture thoughts, feelings and ideas. Space precludes us from examining in detail whether libertarian legal systems will recognise so-called “intellectual property” but here we must assume that it will not and that all claim of ownership will be over real, tangible, existing goods. Secondly, it should be self-evident that only a legal person can take legal ownership of goods. Objects and animals, as well as not possessing the right to self-ownership, cannot also possess the right to own goods external to them. A banana, a mere unconscious object that cannot own itself a fortiori cannot be said to have rights of ownership over other such objects. Self-ownership is, therefore, a pre-requisite for owning something else. Thirdly, a legal person must have put the good to productive use. In libertarian theory, the first user-occupier of a good is the one who is able to claim the right to original appropriation of that good and, thus, ownership over it3. A libertarian legal system will therefore have to determine precisely which actions will satisfy the demonstration of putting a good to a productive use. Is, for example, touching an object enough to satisfy this criteria, endowing the individual who laid his finger upon the good the exclusive right to its enjoyment? Or is something more required? The key test is likely to be whether a given action produces another good from the original good, in other words it is diverted from delivering one stream of utility to delivering another. This could be something as simple as moving an object from one place to another, gathering logs to use as firewood, removing weeds from soil to plant seeds, and in most cases simple possession may suffice to prove one’s claim to title. The importance of this criterion lies in the fact that a person must be able to demonstrate that he was the first who recognised the good as a scarce and valuable entity and so deliberately laboured in order to ensure that the good provided its highest valued utility. Fourthly, the productive use of the good must extend over the entirety of the physical good claimed and thus serve to clearly ring-fence the good from matter that is not put to productive use. As we said in part one, the purpose of rights and ownership is to avoid or otherwise resolve conflicts arising from scarcity – this cannot be done unless the matter over which a person claims a right is encircled by a clear boundary, a red line over which people know they must not cross. For most self-contained objects, this will not present too much of a problem. One log of wood for instance, in bounded within the physical limits of the good itself – when I move it from the wood to my home in order to use as firewood it is clear that the extent of my productivity is limited to that log and not to an indeterminate quantity of the forest. It becomes more difficult when this is not the case. One example that is used frequently as an objection to the homesteading principle is if several people are swimming or sailing to an ownerless island does the first one to reach it claim the entire island? Or if a person stands on a cliff and urinates into the sea, is he entitled to ownership of the entire ocean? The answer is no, because the extent of the person’s physical presence has not served to ring-fence the entire island or the entire ocean within his sphere of productivity. The person’s valuable ends were achieved without any productive effort being extended beyond his immediate location. If a person wishes to claim ownership over the entire island or the ocean he must be able to demonstrate the extent of his productivity over that entire matter. His ownership will stop at the point where evidence of productive use also stops, and the matter within that sphere of productivity will be ring-fenced. There will be cases where a person may have exerted (at least in his mind) productive effort but there is insufficient evidence to prove that such an effort has ring-fenced property. The most typical type of example will be on boundaries of homesteaded land. If a person has homesteaded an allotment, that part of the garden where crops have been planted and are growing will clearly be part of the ring-fenced allotment. However, at the boundary of the allotment, will say, evidence of a dropped tool a few metres from the nearest crop, or a single footprint made when the gardener stood back to view his work, serve to extend the boundary of the homesteaded land to these locations? Clearly, if the gardener had erected fencing to close in his land then this would itself consist of productive use and this problem would not exist. A related problem is where productive use has apparently extended to only part of a good yet an individual alleges that the whole good is necessary to fulfil his ends. An example is if I draw water daily from a small lake by standing on its edge and then someone else begins to draw water from the other side, can I complain that this latter person is violating my private property? A libertarian court is likely to conclude that the answer is no as if the entirety of the lake was of value to me then I should have extended my productive efforts to ring fence the whole thing. Instead, my only productive acts extended to a small portion of the water available each day thus I did not demonstrate that the remainder of the water was of any value to me. Water rights are, of course, a complicated issue, especially with regards to flowing water but we can acknowledge that in clear cases where it was possible to fully homestead a good and that opportunity was not taken a person cannot later complain that his rights were usurped. Furthermore, the lack of clear boundaries of productive action would lead to obvious absurdities. Whenever a person puts anything to productive use this matter will be connected to the entire Earth – nay, the entire universe. Was the first person who trod on the virgin soil of the planet able to claim ownership over the entire thing? Fifthly and finally, the good must, of course, be ownerless and no one else must have previously satisfied the criteria we have just elaborated. If another person has done so then this latter person’s title trumps that of the claimant. An important consideration in this regard is that a libertarian legal system will have to determine which actions of a person who owns a good are sufficient to determine the abandonment of and, hence, the loss of ownership over that good. This is important for two reasons – first, to determine if a subsequent person may extend productive use over the good and thus claim ownership over it without contravening the rights of the previous owner; and secondly, to determine if the first owner is liable in the event that the good physically interferes in someone else’s property. If, for example, a person builds a house and, after a period of time, abandons it and it falls into disrepair it may subsequently collapse into a neighbouring dwelling. If the original owner of the collapsed property still owns it then the owner of the damaged, neighbouring property may be able to sue him; if not, and the collapsed house is ownerless and is wholly placed back into the sphere of nature then the collapse is of the same ilk as a tree falling or a lightning strike and so the owner of the neighbouring property will be without remedy against anyone else. As we shall see, the contract is one method of exercising the abandonment of a good by transferring it to another individual and the terms of contracts may selectively nullify the original owner’s liability for past actions vis-a-vis the property, transferring this liability to the new owner.

Conclusion

Having, therefore, outlined how a libertarian legal system will determine who has self-ownership and how the original title to goods will be established, we can now, in the remaining parts of this series, turn our attention to specific causative events of legal liability.


View the video version of this post.


Please note that this post received minor revisions on January 16th, 2018.

1This is not to suggest, of course, that attempts to categorise individuals as being below the status of full a legal person have not been made. In the former Soviet Union, for example, a declaration that a person was mentally disabled and thus subject to fewer rights (if any) was a convenient method of disposing of political opponents. Nazi racial doctrine regarded certain races as being sub-human although that creed’s inability to think in anything other than collective rather than the individual perhaps makes little difference. Furthermore, the current war against terror seemingly allows governments to categorise so-called “terrorist suspects” as “enemy combatants”, suspects who have been denied the full rights due to that latter category under the Geneva Convention.

2The legal status of collectives acting as a single, legal person – such as incorporated associations and companies – we will not discuss here.

3In addition there are also easement rights but we shall, for the sake of brevity, concentrate on ownership rights.

What is Liberty?

1 Comment

While proponents of liberty are often to be found waxing lyrical about its virtues, it is worthwhile taking a step back and discussing what liberty actually means –  that is, rather than attempt to explain why it is just, how do we define it in such a way as to distinguish it from other political philosophies?

First, let us discuss what liberty is emphatically not. It does not mean that one should be able to live a life free of any of the obstacles that humans are burdened with by nature. So for example, “freedom” from hunger, from poverty, from sickness, from the cold, the rain, and so on are all freedoms that humans can achieve only through their power over nature and through the utilisation of nature’s resources in order to provide relief from want. They are problems that would confront any human even if he was the only being in existence and to say that we “need” these freedoms is to state the obvious truism that we do not live in the Garden of Eden. Rather, liberty is a sociological concept – it refers to the relationship that arises between humans in the same world, not between humans and nature. This equivocation is frequently taken advantage of by those whose political orientations are far from libertarian. Not only, for example, is taxation and redistribution justified to provide “freedom” from the very things that we just listed but so too do our political lords and masters abuse the term when discussing the rights that they are kind enough to grant us. The so-called “right to life”, for example, can mean anything from not being killed by another human to the provision of food and shelter to sustain it. A vaguely defined right to “privacy”, i.e. to be left alone by everyone else, has to be “balanced” by my right to “security”, which requires resources from nature in order to achieve it.

Neither also does liberty mean surrendering oneself to some kind of “spontaneous order”; properly understood, the concept of such an order refers to institutions that emerge indirectly as a result of individual humans each pursuing their own unique ends, as opposed to through the direct design or agreement of any handful of them. Money is a case in point. The concept does not warrant the likening of society to some kind of biological organism (where the individual cells and organs have no independent will) nor does it mean that order unfolds in a manner akin to evolution or natural selection, a process that (excluding the possibility of divine intervention) is inherently purposeless. Such analogies are metaphorical in the very strictest sense.

Rather, the sociological concept of liberty arises because a human’s life must be led by using the resources of nature to further the ends that he desires. Individual humans, however, run into conflicts over how these resources should be used as they each want to use the same resources towards their own, competing ends. In other words these resources are interpersonally scarce. This is the starting point of all political philosophy – how to resolve conflicts that arise from the scarcity of resources in the world. Indeed, all political philosophies are little more than attempts to solve this problem. The rights that derive from these solutions are property rights, the strongest of which is ownership – the granting of the power of disposal over a scarce resource to one person at the exclusion of all others. There are two key aspects that we can deduce from this fact. First, those philosophies that view property as oppressive or as an affront to liberty simply dismiss the sociological problem rather than answer it. To outlaw any property at all keeps everyone in the original position of conflict in which we are all fighting over resources. Similarly, abolishing property because it “stops everyone” from using a resource simply begs the question – a property right has to be granted precisely because everyone cannot use the resource. Any widespread attempt to abolish property has merely fallen subject to the “iron law of oligarchy” where a few elite caretakers administer the resources and have to determine the uses to which they are put, with any residual “right” that the Average Joe has to a resource remaining as an empty, hollow shell. Any incisive concept of liberty, therefore, has to accept that other people’s desires to use the means available will be an obstacle in one’s own life and hence it must utilise the concept of property. Secondly, it shows why all consequentialist or utilitarian arguments that attempt to show us why “we” are “better off” with liberty than some alternative miss the point. For the precise problem is that we all think that there are different consequences that are better than someone else’s and so we need to decide whose consequences should prevail with the scarce means available.

The essence of liberty, then, is in how it defines property rights – quite simply, that you are entitled to the ownership of your own body and the external matter of which you are the first user-occupier or the latter’s voluntary successor in title. No one, therefore, can act violently against your own body or against the previously ownerless matter that you brought into use or acquired in trade through voluntary exchange. Within this sphere of ownership you can do anything you want. No, as a free individual you will not have a guaranteed freedom from hunger, from sickness, old age, death and so on (although the free market has been shown to increase a human’s power over nature more than any other system). And the same rights held by every other human will get in your way from time to time, if not all of the time. But only by defining liberty in this manner can libertarianism address the scarcity problem and be ideologically distinct from other attempts to do the same. The justice of liberty defined this way is, of course, another matter.

View the video version of this post.